Manager Dan Kelley prefers to describe his fund as looking for companies whose growth is underestimated by Wall Street analysts.

Kelley favors three types of growth stocks:

Stable earnings growers.

Companies on a hot streak, with high sustainable growth for many years.

Opportunistic growers, which have low valuations but are near a point when a catalyst sparks a growth spurt.

Google (GOOG), Monsanto (MON) and Visa (V) are examples of stable growers. Michael Kors (KORS) is in his high sustainable growth bucket, as he puts it. Manitowoc (MTW), new to the fund as of its latest disclosure, and United Technologies (UTX) are opportunistic growers.

Those latter two stocks benefit from the rally in nonresidential construction, Kelley says. Manitowoc sells cranes and lifting equipment. United sells elevators and heating systems.

Those areas are familiar to Kelley. Before taking the reins of Trend in January last year, at various times he has served as research analyst covering REITs and homebuilder stocks as well as manager of Select Construction & Housing along with other duties. He now runs four portfolios in all.

Another trend Kelley has played is refurbished auto parts. He owned LKQ (LKQ) as of his latest disclosure.

"Insurers are looking to lower auto claims expenses, so they're utilizing more refurbished parts. LKQ owns junk and scrap yards, where they get parts refurbished and recertified," Kelley said.

Barriers To Entry

The field has grown fast and has barriers to entry. "They have a distribution network of hubs across the U.S. that can get parts to mechanics and repair shops," he said.

The fund was up 6.86% this year going into Tuesday. Its large-cap growth peers tracked by Morningstar Inc. averaged 7.63%. The S&P 500 was up 10.24%.

Over the past three years the fund's average annual return is 11.33% vs. 9.19% for its peers and 11.29% for the big-cap bogey.

The fund's first-quarter relative performance trailed the S&P 500 as many investors shifted into defensive names and stronger yield payers. Rather than make such moves, Kelley continued to pursue growth. "I stuck to my philosophy and process," he said.

Kelley trimmed Apple (AAPL) in recent months. Its margins have shrunk due to rivals offering similar products at lower prices, he notes.

Manager Dan Kelley prefers to describe his fund as looking for companies whose growth is underestimated by Wall Street analysts.

Kelley favors three types of growth stocks:

Stable earnings growers.

Companies on a hot streak, with high sustainable growth for many years.

Opportunistic growers, which have low valuations but are near a point when a catalyst sparks a growth spurt.

Google (GOOG), Monsanto (MON) and Visa (V) are examples of stable growers. Michael Kors (KORS) is in his high sustainable growth bucket, as he puts it. Manitowoc (MTW), new to the fund as of its latest disclosure, and United Technologies (UTX) are opportunistic growers.

Those latter two stocks benefit from the rally in nonresidential construction, Kelley says. Manitowoc sells cranes and lifting equipment. United sells elevators and heating systems.

Those areas are familiar to Kelley. Before taking the reins of Trend in January last year, at various times he has served as research analyst covering REITs and homebuilder stocks as well as manager of Select Construction & Housing along with other duties. He now runs four portfolios in all.

Another trend Kelley has played is refurbished auto parts. He owned LKQ (LKQ) as of his latest disclosure.

"Insurers are looking to lower auto claims expenses, so they're utilizing more refurbished parts. LKQ owns junk and scrap yards, where they get parts refurbished and recertified," Kelley said.

Barriers To Entry

The field has grown fast and has barriers to entry. "They have a distribution network of hubs across the U.S. that can get parts to mechanics and repair shops," he said.

The fund was up 6.86% this year going into Tuesday. Its large-cap growth peers tracked by Morningstar Inc. averaged 7.63%. The S&P 500 was up 10.24%.

Over the past three years the fund's average annual return is 11.33% vs. 9.19% for its peers and 11.29% for the big-cap bogey.

The fund's first-quarter relative performance trailed the S&P 500 as many investors shifted into defensive names and stronger yield payers. Rather than make such moves, Kelley continued to pursue growth. "I stuck to my philosophy and process," he said.

Kelley trimmed Apple (AAPL) in recent months. Its margins have shrunk due to rivals offering similar products at lower prices, he notes.

See Also

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